Final Thoughts

It’s too early to provide any concrete answers to that. Our latest market survey found that prices were still falling and lead times still contracting.

That’s probably to be expected. Mills sometimes discount, especially to larger buyers, ahead of increases.

The first indication of an increase succeeding might be lead times extending if some of those buyers got off the sidelines and placed orders. We haven’t seen that yet.

Preliminary Survey Results

But the increase has already succeeded in changing some minds. In our last survey, two weeks ago, only 4% of respondents said they thought prices had already bottomed. The overwhelming majority thought prices still had room to fall.

We won’t release full results of our latest survey until Friday afternoon. But preliminary results indicate that a bigger minority, nearly 18%, now think prices have bottomed.

Here is what some of the folks who think prices have already bottomed had to say:

“Pricing is tricky now. … Basically, some deals still to be had. But I think it is about a low as it will get.”

“I think the final deals get pulled off before the end of June, and then the price increases start to take hold.”

“Bottomed for now. (And) we will see resiliency in nonresidential construction 2H.”

“Temporary bottom before prices resume decent in a few weeks.”

Here is what some of those who don’t think prices will bottom until later this summer, or even this fall, had to say:

“The economy is slowing down, and there is excess domestic and foreign capacity.”

“There is still quite a bit of negotiation going on despite the recent announcements.”

“Unfortunately, I don’t think last week’s hikes will stop the bleeding, let alone raise the indices. Just too much steel out there.”

“I feel we may see a dead cat bounce with the announcements, and pricing will fall further.”

There are merits to all of those opinions. A lot might hinge on whether we continue to see lower-priced imports into the US. In short, could US price hikes encourage both a near-term bottom and more offshore purchases over the longer term?

Imports

I ask that because prices in Europe and Asia are significantly lower than those in the US, so let’s briefly consider some possibilities for each region.

South Korea, one of the largest foreign suppliers of HRC to the US, is not subject to a 25% Section 232 tariff. We’d heard offers from Korean mills for hot-rolled coil in the low $700s per ton (perhaps even the $600s per ton) for fall delivery to the US as recently as last week. We’d also heard that certain European mills were matching those prices.

But South Korea is subject to a hard quota, which by definition limits its participation in the US market. And some sources told us Korea might be oversubscribed on those offers and/or close to bumping up against its quota limits.

We’re told material from Southeast Asia is also competitive. Buyers might balk, however, at the three/four-month lead times associated with such buys.

That leaves Europe, which can have steel to the US – especially to Great Lakes or East Coast ports – in as little as two months.

Section 232 has been scaled back on steel exported from the EU. I won’t get into the country-specific quotas. The point is this: the EU, unlike South Korea, is subject to a tariff-rate quota (TRQ), or soft quota. That means the EU can ship steel under its quota limits without the 25% tariff. And it can continue to ship after those quota limits have been reached – with the 25% tariff applied.

The would normally make EU steel prohibitively expensive. European steel doesn’t typically come cheap. That said, with Germany, Europe’s manufacturing hub, in recession, it’s hard to see EU steel prices rising. Could we see US buyers finding steel from Europe competitive in the US, even with a Section 232 tariff attached? I think that’s one to watch.

By Michael Cowden, michael@steelmarketupdate.com